Israel-Hamas war is ‘new cloud darkening horizon’ of global economy, IMF warns

The Israel-Hamas war is a “new cloud” on the horizon that threatens to darken an already murky global economic outlook, the head of the International Monetary Fund has warned.

Kristalina Georgieva said severe shocks are becoming “the new normal” in an economy dominated by weak growth.

Speaking at the annual meetings of the IMF and World Bank in Marrakech, she confirmed she is “closely monitoring how the situation evolves” – especially when it comes to oil prices.

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And while there have already been some market movements, Ms Georgieva stressed it is too early to predict the full economic impact of the conflict.

“Very clearly, this is a new cloud on not the safest horizon for the world economy, a new cloud darkening this horizon,” she told a news conference.

Many financial leaders have expressed concern about the sudden eruption of violence in the long-running conflict, which has already claimed more than 2,500 lives.

Ms Georgieva said: “It’s heartbreaking to see innocent civilians dying. Who pays the price? It is the innocent who pay the price.”

French finance minister Bruno Le Maire, who is also in Morocco, told reporters any regional expansion of the conflict would lead to “problematic economic consequences” for energy prices and global growth.

Even before Hamas launched its unprecedented attack last weekend, the IMF was warning global growth was set to remain tepid for this year and next.

It has forecast growth of 3% in 2023 and 2.9% in 2024 – well below the historical average of 3.8% seen between 2000 and 2019.

In a statement on Thursday, the agency said: “The IMF deeply mourns the tragic loss of life of so many civilians in Israel and Gaza.

“To those who have lost loved ones, to colleagues and partners in the region, and those worried about family and friends, you are in our thoughts. We hope that peace and stability prevail.”

Read more:
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Elsewhere in her news conference, Ms Georgieva warned interest rates will need to remain higher for longer because inflation remains elevated in many countries.

The IMF recently released a new report that suggested the UK will have the slowest rate of economic growth in the G7: 0.6% compared with 1.2% in the EU and 1.5% in the US.

But according to Sky’s economics and data editor Ed Conway, the gloomy forecast needs to be taken with a pinch of salt.